Current challenging economic conditions mean that many employers are being forced to consider ways of reducing overheads, and in particular their wage bill. One way in which this can be achieved is to reduce the number of employees by making redundancies. Unfortunately, no matter how much you care about your employees, redundancy is sometimes inevitable if your business is to survive in a competitive market place.

Wrongly conducted redundancy procedures can end with expensive and time-consuming Employment Tribunal proceedings. This is a particular risk for smaller and medium-sized organisations, which often lack the necessary procedures, experience and appropriately trained management staff to cope with the legal requirements of redundancy. Pickerings Solicitors LLP Employment team have extensive experience in guiding businesses through the legal requirement to ensure the best possible outcome for your business.

Here we provide some general guidance to the steps which employers must take to avoid claims of unfair dismissal, however this is no substitute for specialist legal advice, since individual circumstances can vary enormously.

Is there a business case for redundancy?

You must be able to show that any redundancy was necessary from a business point of view. Be in a position to produce evidence, which demonstrates that the reason for the dismissal for redundancy does have some basis in fact and that a proper business decision was reached.

A tribunal will not look into the merits of any decision but it must be able to see that there was a sound business reason for the decision being made. Typical reasons include falling profits within the company or the adoption of new technology. Look at alternatives to redundancy, for example, job sharing, temporary lay off, part time work or re-training.

Once you have decided that redundancies need be made then you must be seen to follow a reasonable procedure for selecting the individuals who are to be dismissed.

You must have reasonable selection criteria, which are objective and those that a reasonable employer would use.

The Pool of employees from which redundancies will be taken.

The first stage is to determine the pool of employees from which the selection should be made. This may be the entire workforce or just part of it, for example workers at a particular site which is being closed. A pool will usually comprise employees doing work of a particular kind. For example, if a company needs to reduce the number of secretaries it may select a pool of secretaries from a particular department or from the firm as a whole.

Consultation

Having identified the pool, you have a duty to consult with the individuals concerned prior to dismissal. This duty is very clear and should be undertaken whether your organisation is large or small. Write to the each affected employee explaining that their job is at risk of redundancy and the reason why. Tell them the procedure that you intend to follow, including the date time and place of the consultation meeting, and explain that the consultation will take place before a decision is made.

Ask for volunteers. If redundancies are large scale (20 or more in 90 days or less) then there are additional legal requirements, which we can advise about in greater detail

Selection Criteria

The criteria for the selection of individuals from a pool must now be set. These must be objective, e.g. time keeping, disciplinary record, quality of work and efficiency. It is usual to prepare an assessment form for each employee and a matrix, to score the individuals. Make sure that this is carried out in a fair and objective way. Gut feelings or simply not liking a person will be seen as subjective and therefore unfair. If you would like help in drafting the criteria please ask.

Once you have decided upon your selection criteria you must apply them carefully and fairly to the workforce. A record of due consideration of all the criteria should be kept. Those employees with the lowest scores will be those you have provisionally selected for redundancy.

As part of the process you should hold meetings with each affected employee. The consultation process should be two-way. The employee may have valid observations which persuade you to reconsider. Keep an open mind. Do not make your final decision until the employees have been given the opportunity to voice their comments and suggestions. If appropriate, consider with the employee whether as an alternative to redundancy they could do a different job, work fewer hours or take less pay. Consider all suggestions and options before proceeding further. A person who has been made redundant will almost certainly succeed in a claim for unfair dismissal if they were not consulted prior to notice of redundancy being given.

The Dismissal

When the consultation process is concluded, those selected for redundancy must again be invited, in writing, to a meeting. The letter must offer the right to be accompanied by a colleague or a suitably qualified Trade Union official. Once the decision has been made to dismiss an employee on the grounds of redundancy they must be given the correct period of notice, the length of which depends upon their terms and conditions of employment and statute. Dismissed employees must also have an opportunity of appealing against the decision to terminate. Tell them of that right in the letter which confirms the dismissal.

In addition if the employee is dismissed for redundancy then they may be entitled to a redundancy payment. The amount they are entitled to depends upon the employee’s age, pay and length of service, with these details a calculation of the payment can be made. If you want help in preparing that figure, please ask.

The redundant employee should also be paid holiday pay for any holiday accrued during the holiday year but not yet taken.

Compromise Agreements

It is possible to make an individual redundant and also negotiate a Compromise Agreement within the context of the Employment Rights Act 1996, in which the former employee, in return for the redundancy payment (usually with an enhancement above the statutory minimum), agrees not to pursue a claim for unfair dismissal. The employee concerned has to receive independent legal advice if the agreement is to be enforceable. We can assist by drafting that document for you.

To summarise, you must have a sound business reason to dismiss for redundancy. You must then notify individuals that their job is at risk and consult the employees affected. Choose those to be dismissed using selection criteria which are fair and reasonable and applied in a fair and reasonable way. Arrange in writing to meet again with anyone who is to be dismissed for redundancy, tell them of their right to be accompanied, give appropriate notice, make the redundancy payment and tell them of the right to appeal.

This is something of a whistle-stop tour around the basics of making an employee redundant. If you wish to discuss any points in further detail, or require specific advice in dealing with a redundancy situation please give Pickerings Solicitors LLP a call.

Contact Simon King on 01827 317071 or Sue Hatton on 01827 317073